Daily Gains Letter’s financial analyst, Moe Zulfiqar, outlines the year in review for Wall Street and offers his top investment strategies for 2014.
www.DailyGainsLetter.com) an e-letter published by Lombardi Publishing Corporation, a 27-year-old consumer publisher that has served over one million customers in 141 countries, is announcing its review on the year on Wall Street and its top investment strategies for 2014.— Daily Gains Letter, (
“No matter how investors look at it, 2013 has been a stellar year for the key stock indices,” says financial analyst Moe Zulfiqar. “The New York Stock Exchange is up almost 20%; the S&P 500 and Dow Jones Industrial Average have both advanced around 25%, and the NASDAQ Composite index has soared almost 35%.”
If investors consider the year-to-date chart for the S&P 500, Zulfiqar notes, they will notice it continues to make higher lows and higher highs, with momentum tilted towards buying. However, if investors look at how 2013 progressed, they will see that the key stock indices continued to march higher in spite of a number of disturbing economic headwinds.
“First, sales of companies on key stock indices aren’t really meeting expectations. For example, in the third quarter, only 52% of the S&P 500 companies were able to beat their revenue expectation, while 73% of them were able to beat their corporate earnings estimates,” Zulfiqar says. “So far, 94 of the S&P 500 companies, or 88%, have already issued negative earnings guidance for the fourth quarter; only 12 have issued positive pre-announcements.” (Source: “Earnings Insight,” FactSet web site, December 20, 2013; http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_12.20.13.)
Second, he continues, companies on key stock indices have logged a record high for share buyback activity. In fact, in 2013 so far, share buybacks have amounted to $460 billion; this is the highest amount since 2007. At the very core, share buybacks are a kind of “financial engineering,” says Zulfiqar. Through buybacks, companies on the key stock indices can make their corporate earnings per share look better without having to increase their overall earnings. (Source: Jaisinghani, S. and Raghavan, M., “3M sets year’s biggest U.S. buyback plan, raises dividend,” Reuters, December 17, 2013; http://www.reuters.com/article/2013/12/17/us-3m-forecast-idUSBRE9BG0PO20131217.)
“Lastly, 2013 wasn’t all that great when it comes to U.S. economic growth. The unemployment rate remained high; it has declined a bit from what it was earlier in the year, but mainly with the help of low-wage-paying jobs. Further, the number of people using food stamps has skyrocketed—if they were a nation, it would be similar in size to Spain,” Zulfiqar observes. “The key stock indices rely on economic growth, and if there isn’t any, then the stock market can’t really go much farther.”
Zulfiqar concludes that as investors head into 2014, it’s important that they review their portfolios. If one’s portfolio has outperformed the key stock indices, they need to plan on what path to take in light of all the risks that are building up. If, on the other hand, the retirement portfolio has underperformed the key stock indices, the investor should consider getting rid of some positions. After all, by holding onto a losing position, investors are missing out on future opportunities, says Zulfiqar.
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